Don’t take the demand for personnel for granted! Axholmen’s experience is that a correct representation of the demand is a prerequisite for a successful implementation of necessary measures as well as for achieving desirable results – quality, productivity, employee engagement
In Sweden, 80% of all new companies are service companies. The private service sector now accounts for half of Sweden’s GDP and 3 out of 4 Swedes work with some form of service delivery (source: Almega). To manage increased competition, or prepare for a coming recession, focus is often directed to the primary resource – the employees. If the demand for personnel is volatile during the year or the day, companies tend to focus on terms and conditions of employment as well as work schedules. To optimize the use of resources at service companies, Axholmen wants to emphasize the importance of going the right way about it, namely, to first address the resource needs.
Four steps to maximize employee efficiency in the service sector
EFFICIENCY IN THE SERVICE SECTOR
The service sector encompasses everything from retail to service facilities. As is well known, services are characterized by the fact that they cannot be inventoried and the labor accounts for a large portion of the cost. Since the 70s, research in the area has therefore focused on how to best match the internal supply of labor with the internal demand. Demand is here referring to the personnel needed to produce the services at any given moment, which can fluctuate over the season, week and/or day.
For instance, to produce the service in a cost-effective way, e.g., a supermarket needs to match the number of resources with the labor demand, which is greater on Fridays and Saturdays compared to the beginning of the week (see image 1).
This article is applicable to all labor-intensive business with fluctuating demand, such as retail, transport and logistics, warehousing, travelling and tourism, services facilities etc.
Successful and sustainable resource planning leads to advantages for the company in terms of improved quality and customer satisfaction, increased productivity (ca 10% according to Axholmen’s experience), and increased employee engagement due to more explicit expectations regarding tasks and more time for professional development.
1. DON’T TAKE THE DEMAND FOR GRANTED!
Axholmen’s experience is that service companies tend to focus on activities related to the labor supply, i.e., obtaining the optimal workforce for a given demand for skills and labor. Typically, companies review the labor force mix, introduce job rotation, create efficient work schedules (including system support), or increase the flexibility by using staffing companies or subcontractors.
These actions are often necessary for achieving efficiency, but to reach maximal efficiency, the demand must also be optimized (see image 2). Taking Swedish labor legislation and the effect on the employee’s life situation into consideration, the importance of starting in the right end can be further emphasized.
2. DEFINE AND UNDERSTAND DEMAND
Axholmen uses data driven analyses, interviews, and observations to develop an understanding for the current resource demand. What activities are required? How much time is needed to perform the activities, and when should the activities be performed (e.g. is volume driven by customers or by incoming deliveries)? By comparing this with current scheduling, an understanding of when there is a lack or a surplus of personnel is created (see image 3).
3. IDENTIFY THE POTENTIAL IN DEMAND
The potential in resource optimization can be found in three categories, of which two are related to the demand:
Move the supply closer to the demand, referring to the same measures described in the introduction – scheduling, employee terms and conditions etc.
Reduce the demand through increased productivity – Axholmen often uses internal benchmarks to compare time per activity between units and identify “best in class” (see image 4), while analysis of route alternatives can be used for companies with elements of transport in the production
Balance the resource needs to better match the available personnel resources, i.e. eliminate the understaffed “peaks” that often leads to costs in form of over-time, temporary workers etc. – the internal benchmarks can be used here as well
4. REALIZE THE POTENTIAL IN DEMAND
The above outlines two approaches to optimize demand. The next step is to identify the right activities to realize the potential.
To balance the demand, activities that are not time-critical can be shifted to periods with low intensity. Order systems or differentiated pricing that steers the customer to periods of low intensity is another measure.
To increase the productivity, companies can implement initiatives such as:
Automatization, tools, or professional development to make an activity more resource efficient
Shift activities to customers through self-service. E.g. let customers collect goods themselves instead of having a desk in store, or let transport customers book online rather than via customer service.
Eliminate non-value-adding activities, such as some administrative tasks. Axholmen’s experience is that many organizations often need external support to be challenged in this area.
Don’t take the demand for personnel for granted! The best effect from classical measures such as efficient scheduling and employment terms and conditions is achieved when service companies have an optimized and fact-based understanding of the demand for personnel. Axholmen’s experience is that the development of a correct representation of the demand is a prerequisite to succeed in implementing necessary measures and achieving desirable results – quality, productivity, and employment engagement.
Read more about how we can help your company
Want to know more? Contact author and responsible partner
Feel free to contact us for more information or to book an unconditional meeting
Complex sourcing processes such as selection of outsourcing partner often represent large economic values and should reflect interests of many stakeholders. Here we share our key success factors for successful sourcing (and eventually implementation) of complex services and products
For many companies, a majority of revenue comes from the existing customer base in the form of ongoing agreements or new business from existing customers. Price adjustments or a transition to a new commercial model can be very important value adders – we share seven success factors that we believe affect the level of acceptance to a high degree regardless of industry and geography